New chart shows China GDP could overtake US sooner as Covid took its toll


Workers stand at the port of Qingdao, Shandong province, China June 10, 2019.


BEIJING — China is set to overtake the United States as the world’s largest economy a few years earlier than anticipated due to the coronavirus pandemic, analysts said.

The U.S. reported last week that gross domestic product in 2020 contracted by 2.3% to $20.93 trillion in current-dollar terms, based on a preliminary government estimate.

In contrast, China said its GDP expanded by 2.3% last year to 101.6 trillion yuan. That’s about $14.7 trillion, based on an average exchange rate of 6.9 yuan per U.S. dollar, according to Wind Information data.

That puts China’s economy at only $6.2 trillion behind the U.S., down from $7.1 trillion in 2019.

“This (divergence in growth) is consistent with our view that the pandemic has been a much larger blow to the US economy than China’s economy,” Rob Subbaraman of Nomura said in an email Friday. “We believe that on reasonable growth projections the size of China’s economy in USD terms will overtake the US in 2028.”

If the Chinese currency strengthens further to around 6 yuan per U.S. dollar, China could surpass the U.S. two years earlier than anticipated — in 2026, Subbaraman said.

The yuan began strengthening against the U.S. dollar in the last six months to levels not seen in more than two years.

Covid hits the U.S. the hardest

“The latest GDP data shows that China’s recovery enjoyed strong momentum towards the end of 2020, due to its ability to contain the pandemic,” Tai Hui, chief Asia market strategist at J.P. Morgan Asset Management, said in an email Friday. He expects it will take another eight to 10 years for China’s GDP to catch up to that of the U.S.

He said new government restrictions following pockets of coronavirus cases in China in the last several weeks will likely give mixed signals on first quarter growth, while the U.S. will benefit from government support passed late last year.

But Tai added that GDP is “just a convenient comparison” and that when making decisions, investors should also consider differences in economic structure, income, development and competitive edge.

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